Chinese consumers are forsaking EVs and hybrids in favor of sport utility vehicles and luxury cars, despite ambitious efforts by the government to stimulate the electric car industry.

A report in the Guardian newspaper says that Chinese electric car manufacturer BYD – backed by famed American investor Warren Buffett - has scaled back its goals “after failing to find a market because of costs, safety concerns and underdeveloped battery technology.”

The Financial Times notes that BYD “has repeatedly delayed plans to commercialize and export its electric vehicles.”

Even with subsidies of 60,000 yuan ($9,400) for electric vehicles and 50,000 yuan ($7,800) for plug-in hybrids in five cities, consumers are balking because conventional cars still cost less and are more reliable, the Guardian says.

The slowdown at BYD and others has prompted Prime Minister Wen Jiabao to call for reconsideration of China’s plans to move away from conventionally fueled vehicles as a way to cut CO2 emissions and pollution.

Earlier this year China set targets of producing a million new EVs and plug-in hybrids a year by 2015.The country’s Ministry of Industry and Information Technology has pledged investments of more than 100 billion yuan ($15.7 billion) over the next 10 years to stimulate production.

But the Guardian sites a report from IHS Automotive noting that last year “the takeup for such vehicles was far behind the government's time-frame."

IHS speculates that Beijing may now place greater emphasis on fuel-efficiency in traditional cars as well as on hybrids, even though the research firm also points out that sales of the Toyota Prius hybrid fell from about 200 in 2009 to a single one in 2010. At the same time, registration of new SUVS- including 425 Hummers - rose by 24% in 2010, and luxury cars soared as Mercedes, BMW, Audi and Rolls Royces all recorded strong growth.

With China having overtaken the U.S. as the world’s largest car market, and with car ownership there still less than half the worldwide average and poised for more boom growth, the world's auto industry awaits the results of Beijing's rethink.